Sam Watkins

And up until very recently, when the unemployment rate has only just started to rise a very small amount, we're up to 4.5%.

5%, which would have been historically considered as being the lowest it could possibly be.

But we've seen a small increase, but we've seen very tight labor markets.

So those things combined really were driving that impulse in inflation to move above the level of comfort for the Reserve Bank before the supply shock in energy from Iran.

Yeah, look, it's very fair to say that the bond market is increasingly focused on fiscal sustainability.

It is a discussion that we have with a lot of our investors, and it's something that we're seeing reflected in markets.

What we're not seeing is a crisis dynamic.

And what we are seeing is a change in the way in which people are reflecting that increased debt in the pricing of longer dated bonds.

And that's what we would refer to as term premium.

So term premium is simply that the longer term the bond, the higher the interest rate expected.

And for a very long period of time, term premium didn't exist in markets, actually.

But since we've had this post-COVID period where you've seen the very high level of fiscal spending and the increase in debt and questions around sustainability, that has increased.

So we've got quite a steep curve now compared to where it was.

Of course, the other thing that is a sort of supply-demand element to that is it's not just the concern on the actual debt itself.

there's a need to continue to issue debt to continue to fund that spending.

And that supply continues to drive the dynamics of where the bonds are priced across that curve.

Look, I think that, you know, it's a discussion, as I say, we've had many, many times.

PIMCO's put out a number of thought pieces on this topic.

Our broad view is that in the three to five year time horizon, which is really sort of the extent of some of our longer dated thinking on the topic, we don't see any major crisis.

Okay, nice.